Why B Corps Matter

It's time for capitalism to evolve from a model of short-term profits for a few to a model of shared and enduring prosperity for all.

By Ryan Honeyman, adapted from The B Corp Handbook: How to Use Business as a Force for Good

| Fall 2014

B Corp certification turns the ambiguous concepts of "going green" or "being a good corporate citizen" into something tangible and measurable that people can easily identify, trust, and support.Illustration courtesy B Lab

(Editor’s note: Utne Reader is published by Ogden Publications, which is proud to be a Certified B Corporation. The following excerpt explains what it means to be designated a B Corporation, and how the model benefits everyone involved.)

I first foundout about B Corporations while baking cookies. The flour I was using—King Arthur’s unbleached all-purpose flour—had a Certified B Corporation logo on the side of the package. “That seems silly,” I thought. “Wouldn’t you want to be an A Corporation and not a B Corporation?” The carton of eggs I was using was rated AA. I was obviously missing something.

An online search revealed that the B logo was not a scarlet letter for second-rate baking products. B Corporations, I found, were part of a dynamic and exciting movement to redefine success in business by using their innovation, speed, and capacity for growth not only to make money but also to help alleviate poverty, build stronger communities, restore the environment, and inspire us to work for a higher purpose. The B stands for “benefit,” and as a community, B Corporations want to build a new sector of the economy in which the race to the top isn’t to be the best in the world but to be the best for the world.

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Since my cookie-inspired discovery, I have watched the B Corp movement grow rapidly and globally. In addition to King Arthur Flour, big-name B Corps include companies like Ben & Jerry’s, Cabot Creamery, Dansko, Etsy, Method, Patagonia, and Seventh Generation. There are now Certified B Corporations in more than 30 countries around the globe, including Afghanistan, Australia, Brazil, Chile, Kenya, and Mongolia (to name a few). Thought leaders such as former president Bill Clinton and Robert Shiller, the winner of the 2013 Nobel Prize in Economics, have taken an interest in the B Corp movement. Inc. magazine has called B Corp certification “the highest standard for socially responsible businesses,” and the New York Times has said, “B Corp provides what is lacking elsewhere: proof.”

In a time of unfortunate political gridlock, the B Corporation is an idea that has generated incredible bipartisan support. In the United States, legislation to create benefit corporations—a new corporate structure based on the B Corp idea—has been passed in “red” states like Louisiana and South Carolina, “blue” states like California and New York, swing states like Colorado and Pennsylvania, and even in Delaware, the home of corporate law, where more than 63 percent of the Fortune 500 are incorporated. It is not hard to see why this idea receives strong bipartisan support. B Corps are pro-business, pro-environment, pro-market, and pro-community.

Business is,for better or worse, one of the most powerful forces on the planet. At its best, business encourages collaboration, innovation, and mutual well-being, and helps people to live more vibrant and fulfilling lives. At its worst, business—and the tendency to focus on maximizing short-term profits—can lead to significant social and environmental damage, such as the BP Deepwater Horizon oil spill or the loss of more than $1 trillion in global wealth in the 2008 financial crisis.

Governments and nonprofits, moreover, are necessary yet insufficient to address society’s greatest challenges. Government budgets are already constrained and are likely to be more constrained in the future, and nonprofits, for all the great work that they do, are structurally limited in their ability to attract and retain talent, to rapidly grow to meet demand, and to adapt to new challenges, because they are heavily dependent on charitable funding.

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Over the past 30 years, there has been a tremendous growth in the number of “conscious consumers,” “socially responsible” investments, and “triple bottom line” businesses that believe that business should strive to do no harm. More recently, there has also been a chorus of voices from thought leaders such as Sir Richard Branson, Thomas Friedman, Bill Gates, and Michael Porter who have recognized a growing trend among entrepreneurs and business leaders to create market-based solutions to our most pressing global challenges.

How do B Corporations fit into this bigger context? What is the point? Why do B Corps matter? There are many reasons why B Corps matter, but the following are some of the reasons that are most meaningful to me, and to the hundreds of B Corps I spoke to during the writing of my forthcoming book: The B Corp Handbook: How to Use Business as a Force for Good (Berrett-Koehler Publishers, October 13, 2014).

B Corps matter because they accelerate the evolution of capitalism. Many businesses tend to focus on short-term profits, not because they are inherently greedy or evil but because short-term profits are the metric that is most often measured and rewarded. B Corporations believe that capitalism needs to evolve from a 20th-century model that focuses on creating profits for shareholders to a 21st-century model that creates shared and enduring prosperity for all stakeholders (including workers, suppliers, the community, the environment, and shareholders). B Corps accelerate this existing trend by creating, using, and promoting new legal structures that aim to create value for all stakeholders, as well as transparent, credible, comprehensive, and independent third-party standards of social and environmental performance that create a more efficient and effective marketplace.

B Corps matter because they redefine success in business. B Corps create a new narrative, a new set of expectations, and a new focus on using the power of business for more than just profits. A great example of this is Adam Lowry and Eric Ryan, the cofounders of Method. Lowry and Ryan took an uninspiring product category—soap—and built a movement around stylish, eco-friendly products that make cleaning safe and fun. Method’s products prevent triclosan, brominated vegetable oil, and other unpronounceable ingredients from getting into our homes and the environment. Method has built an imaginative, irreverent culture that allows its employees to express themselves through their work. It has generated great returns for its investors through its mission-aligned sale to Ecover, a European home products company, and now Ecover is considering whether to become a founding European B Corporation. This is a laudable achievement. And Lowry and Ryan are not alone. There are thousands of others like them, creating businesses that are high growth and high impact. Here are some more reasons why B Corps matter:

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• B Corps matter because they are concrete and measurable. B Corp certification turns the ambiguous concepts of “going green” or “being a good corporate citizen” into something tangible and measurable that people can easily identify, trust, and support. B Corps meet rigorous independent standards of performance for how they treat their workers, engage in their communities, and steward our environment. Most importantly, these standards—and information about how other B Corps perform against them—are transparent. This can help your business stand out in a crowded market, attract the best talent, and turn your customers into evangelists.

• B Corps matter because they build collective voice. Many movements, from clean tech, microfinance, and sustainable agriculture to the buy local and co-op movements, are all manifestations of the same idea: How do we use business for good? The B Corporation amplifies the voice of this diverse marketplace behind the power of a unifying brand that stands for a better way to do business. Certified B Corporations include thousands of businesses, from more than 60 industries and 30 countries, that can speak with one voice when they collectively invite their 20 million closest family, friends, and followers to join them in celebrating the use of business as a force for good.

• B Corps matter because they are better businesses. Many business owners have told me that B Corp certification has helped them become a better business on many different levels—from attracting talent, to raising capital, to winning new business. Indeed, Certified B Corporations were 63 percent more likely to survive the Great Recession (2007–2009) than the average U.S. small business. And when B Corps survive, they benefit all of their stakeholders by creating social, environmental, and financial value.

• B Corps matter because they help us live to higher purpose. There’s a reason why Rick Warren’s The Purpose-Driven Life is among the best-selling books of all time. Most people are motivated by a higher purpose, not profit. Jay Coen Gilbert is cofounder of B Lab, a nonprofit organization dedicated to using the power of business to solve social and environmental problems and help businesses become certified B Corps. In a Huffington Post blog, Gilbert summed up how B Corp taps into this energy: “Whether by law or custom, we believe and act as though business can have no purpose other than the maximization of profits. This belief ... constrains our imagination and ability to live to our full potential as human beings. A full life is a life of service to something more than oneself, whether that something be family, friends, community, the environment, society, or future generations.”

• The B Corp movement stands for positive, innovative, and practical solutions to global problems. There are no furious tirades about politicians or corporate greed. Indeed, on its list of core values, B Lab says, “We stand for something, not against anything.” This positive, can-do philosophy is deeply appealing to me as a business owner, and I think it appeals to many other founders, investors, and executives as well.

In sum, B Corps matter because they are leading a global movement to redefine success in business, so that society will enjoy a more durable shared prosperity. As a result, we will make progress toward alleviating poverty, building stronger communities, creating great places to work, and restoring the environment, for generations to come.